The adoption of QE3 is positive for gold, and reinforces our long-held bullish view on the metal. In a significant monetary policy development, the Fed’s move was not only supportive of risk assets in general but is likely to undermine the value of the USD, diminishing a key headwind to higher gold prices evident in 1H 2012....Recent Fed action is a game changer for gold. The size and strength of the recent upside move in gold is reflective of decisively changed perceptions of Fed policy going forward, in our view. Effectively, QE3 for as long as it takes and close to zero interest rates for another three years is, we contend, markedly different from Operation Twist and only two more years of ultra low rates. The Fed also made it clear that it would pursue easy monetary policy “for a considerable time” even after the economy strengthened....Beyond the shift in Fed policy, other developments have refocused attention on the bullish underpinning for gold. Another key central bank policy development has been the release of details on the ECB bond purchase or Outright Monetary Transactions (OMT) program at its Council meeting on 6 September. This program, subject to the conditionality of a full EFSF/ESM facility, will be unlimited in size. Such actions add materially to the gold market’s perception that expansionary monetary policies, with all of their attendant risks, are on the agenda for an unlimited time and in seemingly unlimited size.